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Hyderabad: A Telangana government-run biodiversity body cannot be taxed by the Centre, the High Court has ruled, quashing an Income Tax (I-T) department order that had frozen its bank accounts.

Justices P Sam Koshy and Narsing Rao Nandikonda set aside the attachment notice issued against the Biodiversity Conservation Society of Telangana (BIOSOT), ruling on August 6 that its income falls squarely within the protection Article 289(1) of the Constitution gives to state government revenue against Union taxation. 

The bench went a step further than simply reading down the notice. It clarified that this protection is not a tax break Parliament could choose to withdraw, but a constitutional guarantee that kicks in automatically once income is shown to belong to the state.

What BIOSOT is and why the HC ruling matters

The verdict turned largely on how the High Court read BIOSOT’s character. It was not an ordinary government company or a commercial arm of the state, the bench found, but a body doing sovereign work – conservation duties the Telangana government took up after the Supreme Court directed it to, when BIOSOT was reconstituted in 2014. 

Its board includes the Chief Secretary and other senior officials, and its mandate is drawn from the Wildlife Protection Act, the Forest Conservation Act and the Biological Diversity Act, tying it directly to the state’s constitutional obligation to protect the environment under Article 48A. 

That combination – sovereign origin, statutory mandate, government control – is what persuaded the court that BIOSOT’s money was, in law, the state’s money.

Dispute over frozen account

Trouble began when the I-T department attached BIOSOT’s bank accounts through a garnishee notice on December 5, 2025, prompting the society to move court, first in 2025 and again in 2026, after which both petitions were heard and decided together. I-T officials defended the move by pointing to a transaction from assessment year 2019-20, arguing that tax deducted at source under Section 194C applied and was payable.

BIOSOT’s response was that none of its money came from trade or business at all. Its funds are statutory contributions and payments ordered by courts, kept as a ring-fenced corpus, with only the interest earned spent on actual conservation work. 

The bench sided with BIOSOT on this, holding that the December 5 notice had been issued without jurisdiction and could not stand.